June 6

“Notorious patent troll” Supports 10 out of 12 of the White House’s “Anti-Troll” Measures

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White House propose patent legislationThe White House has proposed a 12 point plan for curbing the activities of Patent Assertion Entities (PAEs): Fact Sheet: White House Task Force on High-Tech Patent Issues.  The White House couldn’t resist working in a dig – the fact sheet says, “These entities are commonly known as ‘patent trolls.’”

Here’s a surprise: IPNav, a company that has been called “America’s most notorious patent troll,” supports ten out of 12 of the President’s proposals.  Seven of the proposals we support without reservations; three we are OK with conceptually, but are concerned about the details.  There are only two that we believe are a bad idea.

Many of the proposed actions are just the sort of proposals that Google chairman Eric Schmidt, a big Obama supporter, favors.  Which makes the timing of this announcement a little suspect.  Later this week Obama will be hosting a $32,400 a plate fundraising dinner at the home of a venture capitalist in Portola Valley, in the hills above Silicon Valley.  Wonder how many Google execs will be in attendance?  Where did they come up with exactly $32,400 anyway?

None of the 12 proposals are what anyone would call “bold.” They are mostly relatively minor, or in some cases strictly cosmetic.  But they should be enough to convince big company supporters in the Valley that the Administration is doing something about the patent litigation problem.  Seven of the points are proposals for congressional legislative action.  Five are executive orders.  Here’s a summary of the 12 points, with our take on each one:

Legislative Recommendations:

Require patentees and applicants to disclose the “Real Party-in-Interest.”  Anyone sending demand letters, filing patent lawsuits, or seeking PTO review of a patent would be required to updated ownership information.  Legislative action is needed to make it possible to impose sanctions for non-compliance.

We support this, with one proviso: it has to be easy to comply with, and clear what needs to be done to be in compliance.  It sounds a little like the White House is trying to get some credit for a bill that’s already in progress, the “End Anonymous Patents Act,” sponsored by Congressman Ted Deutch.  We came out in support of this bill in our blog post here.
 

  1. Permit more discretion in awarding fees to prevailing parties in patent cases. Would give district courts more discretion in awarding attorney’s fees as a sanction for abusive court filings.

    We are very much in favor of going to a “loser pays” system, but it has to work both ways.  If Polly Patent Owner brings a frivolous case, Polly should pay.  However, if Igor the Infringer Company mounts a frivolous defense on infringement, invalidity or by asserting baseless counterclaims, Igor should also pay.  We made the same point in our analysis of the SHIELD Act, which also provides for fee shifting.
  2. Expand the USPTO’s transitional program for covered business method patents.  This provision would extend additional challenge procedures to a broader category of computer-enabled patents. It would also allow a wider range of challengers to seek review of issued patents by the Patent Trial and Appeals Board.

    We oppose this one, because it is unfair to patent owners.  A patent can be challenged over and over at both the patent office and in court, and as a result a patent owner with a valid patent can be forced to spend a lot of money defending the same patent in different venues, and the day when the infringer has to pay is pushed out.  Companies challenging patents should get one shot: at the patent office, or in court, but not both.
     
  3. Protect off-the-shelf use by consumers and businesses.  This would provide end users with greater protection against being held liable for patent infringement for simply using an off-the shelf product for its intended use.  An example are the recent demand letters MPHJ sent to businesses in Vermont demanding payment for using fax to email features.

    We agree with this proposal.  As long as the end customer has not modified the product, the manufacturer is the one that should be held liable, not the consumer.  Care should be taken that this protection does not extend to users who modify the product in a way that causes infringement.
     
  4. Change the International Trade Commission (ITC) standard for obtaining an injunction.  The ITC currently uses different standards than Federal courts use in deciding whether or not to grant injunctive relief to block the import of products that infringe patents.  This proposal would align the ITC with the standards used in federal court, which are based on the case eBay Inc v. MercExchange.

    We are not opposed to this proposal, although we don’t see why American manufacturers would support as it harms their ability to protect themselves from unfair competition from products that infringe their patents.
     
  5. Use demand letter transparency to help curb abusive suits.  This would “incentivize” the public filing of demand letters in a way that makes them accessible and searchable to the public.

    This is potentially a really bad idea that will do nothing but encourage litigation over negotiation.  Initial demand letters are often somewhat vague, to avoid giving the infringing company the information they need to strike first with a declaratory judgment.  If this is modified in a way that didn't give the infringer that capability, we could support this.
     
  6. Ensure the ITC has adequate flexibility in hiring qualified Administrative Law Judges.

    We support this – qualified judges are always better than unqualified judges.

 

Executive Actions

We support all five of the proposed executive actions, which are basically instructions to the USPTO.

  1. Making “Real Party-in-Interest” the New Default.  This in essence is the same as item 1) under the legislative action, except directed at patent office procedures.  The fact sheet says that the USPTO will start a rulemaking procedure “today.”  What’s odd about that is that a rulemaking on this subject was started by the USPTO back in November.  Maybe no one told the White House.  

    Our position on this is the same as on item 1) above – fine, as long as it’s easy to comply.
  2. Tightening Functional Claiming.  There are those who have claimed that some patents, especially software patents, have been issued with overly broad claims.  The USPTO will provide additional training to examiners on functional claims, and will develop strategies to improve claim clarity.  We support this as training for examiners that will help them issue better patents is always a good thing. 

    We question the need, however, since the evidence is that software patent claims are upheld in court as often as other patents claims.
     
  3. Empowering Downstream Users. The USPTO is going provide education and outreach materials to end users so that they will know their rights when they receive a demand letter or are on the receiving end of a law suit. 

    We are all in favor of this.  As we said in item 4) above, we support protections for end users.
     
  4. Expanding Dedicated Outreach and Study.  The heart of this proposal is an increase in outreach including “high-profile events” around the country seeking new ideas and consensus on patent policy and law.  It also provides for bring more academicians into the USPTO to develop further research on abusive litigation. 

    We are all in favor of more roundtables and discussion, as long as the interests of all stakeholders – including PAEs – are represented.  More often than not, the impact of many of these roundtables has been to provide cover for large companies that are stealing patents. These should be led by the patent office, not by the FTC.
     
  5. Strengthen Enforcement Process of Exclusion Orders. The intent here is better interagency coordination so that when the ITC issues an exclusion order to block the importation of infringing goods, said order can be effectively implemented. 

    We’re all in favor of this.

In general, most of the administration’s proposals are not objectionable.  However, considering that no one in Congress understands patents (only one member of Congress has an issued patent), we believe it would be much better to allow the experts – the USPTO – to figure out the issues and make recommendations to Congress, without interference from the big money lobbyists hired by companies such as Google and Cisco.

 

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